CFA sustainable investing materials explain that after settingupper and lower boundsfor ESG constraints (like carbon intensity or ESG scores), optimization can be carried out either:
On an absolute basis: minimizing absolute risk/return outcomes while meeting ESG limits, or
On a benchmark-relative basis: minimizing tracking error to a benchmark while meeting ESG constraints.Thus, ESG constraints do notrequireeither approach—theypermitboth.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit